As US Home Prices Hit Peak Bubble, “Smart Money” is Selling

What do they know that we don’t?

By Harry Dent, Senior Editor, Economy & Markets:

Two weeks ago, I wrote about an upcoming New York City condominium listing for $250 million. I mention this because, as I’ve explained before, it’s always the tallest buildings and priciest condos to get hit during major downturns.

Just look at the early 1930s and mid-1970s marking peak bubbles if you don’t believe me!

You’ll understand, then, why I smiled when I saw a Forbesslideshow called “The Little Black Book of Billionaire Secrets,” featuring the most expensive homes in each of the 51 states, including Washington D.C.

North Dakota held the honor of the least expensive home, at just under three million dollars, now that the fracking boom has burst. The most expensive home was not in Manhattan, but in Florida – Palm Beach – at $159 million.

That’s a wide range of values, where the top house is 57.2 times the lowest of the high!

A number of top homes in the $4 million to $11 million range, not surprisingly, were found in the Midwest and Southeast – from Ohio and Indiana to Alabama, Mississippi and Arkansas.

I was surprised that D.C. only came in at $12 million, given the exorbitant cost of homes there and the government bubble in hiring. I thought top lobbyists could afford more!

South Carolina, my home state, came in at a very substantial $24 million, with Virginia a bit higher at $25 million.

Texas has always been a lower-cost state, but it attracts major corporate headquarters and the very affluent due to its zero state income tax and more affordable housing. Its top home came in at $28.5 million.

Arizona is a haven for wealthy Californians and its top home was $32 million, as is Hawaii at $35 million.

If we look at the top 10 most expensive states by real estate listing, as you can see in the chart above, it starts with Massachusetts at $35 million, then Washington State at $43 million – likely a software mogul. Next comes Georgia – another city for multinational corporate headquarters like Coca-Cola – with the top home listed for $48 million in an otherwise affordable city, and then New Jersey (no surprise there) at $48.88 million.

Then we get into the heavyweights: Connecticut, perhaps the most beautiful of New York suburbs, is ranked as a big step up in price, at $65 million. Nevada is a bit of a surprise at $69 million – likely carrying an appeal to foreign buyers.

Colorado, not surprisingly, holds some of the most expensive listings at $80 million, which almost have to be in Aspen or Snowmass.

The top three break the ultimate $100 million barrier, starting with New York at $120 million. That is the most expensive condo in Manhattan listed in 2016, after a number have gone for $100 million-plus since 2014. But it has that $250 million listing coming up that will make all others before it look like chump change if it sells. California is not surprising at $150 million, likely in the Hollywood Hills.

But the top spot goes to the zero state income tax Florida and its billionaire haven in Palm Beach… at a cool $159 million.

My bet is that this unprecedented real estate bubble will burst long before that $250 million condo makes it on the listings (if it ever does) at that price. It’s clearly time to be a seller rather than a buyer, especially in the higher end where prices are going the most nuts!

Between Venezuela collapsing and China ramping up public spending, no doubt more hot money will be flowing to US shores. RE prices in Canada are still surging ($2.5 million shacks).

Mark St

Jun 24, 2016 at 6:19 pm

Hmm. I remember when the Chinese were known for laundering clothes.

Petunia

Jun 24, 2016 at 2:25 pm

I wonder how your list will correlate with the upcoming election. It could be a predictor of the heart of the electoral rebellion. These prices are becoming political hot potatoes and no longer command bragging rights.

If Trump wins, I can see Palm Beach becoming the most expensive place in America. He won’t be able to resist the bragging rights. How long it will last is anybody’s guess. Even the Kennedy cache didn’t keep Palm Beach from declining in the 60’s.

Douglas Atkins

Jun 24, 2016 at 2:42 pm

Nevada has stunning eastside Lake Tahoe lakeside estates in Incline Village, owned by Ellison and every other elitist you could name. There is no more beautiful place in the nation. No surprise there. No state tax either.

Ptb

Jun 24, 2016 at 5:06 pm

Selling right now makes sense.

Chicken

Jun 24, 2016 at 5:29 pm

These people have a history of commanding mega salaries so they may pursue their dreams of helping the underprivileged, perhaps these ultra homes of the rich and famous are being liquidated in preparation for the next generous round of philanthropism?

Vespa P200E

Jun 25, 2016 at 9:51 am

I just sold my house in SF east bay suburb. Got 2 offers in 2 days. Hopefully no unrealistic demands from the 2nd buyers since inspection was done yesterday. 1st buyers backed off after 5 days with lame excuse of death in the family.

We bought 5 yrs ago and by sheer luck bought at near bottom due to job relocation from Seattle. Family was not thrilled with my decision but I decided to chip in the paper gain and sit on the side line for few years as I suspect (and concurred by RE agents) that we’re reaching near the top. My last 2 buy & sell costs were all paid by the new employers but I figure commission, closing cost and moves are just part of decent gain.

“The next housing bubble that will burst will be the one in England, the Brexit will see to it…

In this manner, Janet Yellen, by not raising interest rates, will come off as innocent, but it will have the desired effect of a sharp fall in the markets that has already begun…

nick kelly

Jun 26, 2016 at 9:27 am

RE: check 1930’s for tallest buildings going bust- the poster child here WAS the worlds tallest building- Empire State.
Started just before the 29 crash it was built for a bargain price because of cheap labor steel etc. but that didn’t help enough.
Completed in 1933 it languished mostly empty for years. The lifeco lender extended and pretended because it didn’t want the thing.
It didn’t break even until about 1954.
An oddity of the building is that until very recently (and maybe still is) it was almost worthless- only about 40 million or so. The lease on the other hand was a cash cow.
Decades ago the buildings owners entered into one of those disastrous
pre-inflation deals, leasing for a very long time.
This is how an elusive rather shady Japanese ended up owning it.
At first rebuffed when the lifeco decided it couldn’t sell even a faded icon to a guy with serious charges, he used a straw buyer to do the deal.

But the ownership, as distinct from the lease still only gave a return of 1% and the Japanese owner ( who also owned a string of money- pit French castles) needed money.
This is how Trump got involved. He agreed with the buyer’s daughter that he would split any upside he could generate by bringing his name etc. to the building.
What he actually planned to do was to break the lease, which if done would increase the building’s value probably at least 10 times.
After protracted law suits and mud slinging, he was thrown of court.
The whole bizarre story is told in the book: ‘Empire’

nick kelly

Jun 26, 2016 at 9:37 am

Typo: second last line: thrown out of court

Ta

Petunia

Jun 26, 2016 at 9:43 am

The story of the Empire State Building is the story of the Great Depression. Work was started, then stopped when the money stopped. It continued when the govt asked for it to be made into a jobs program to combat the depression. Many workers in NYC survived the depression because of the Empire State Building and the Rockerfeller Center projects.